Moving the Market Forward

Remarks by Bruce I. Knight, Chief
Natural Resources Conservation Service, at
9th National Mitigation & Conservation Banking Conference
Portland, OR
April 27, 2006


More than 70 years ago, we had a major ecological disaster in the U.S. Erosion was destroying the fertility of our nation’s farms and clogging rivers and streams with silt. In 1935, huge dust storms swept across the central U.S. in the wake of severe drought in our Great Plains region.

Keeping the soil on the land was the focus for the Soil Erosion Service, which became the Soil Conservation Service, the predecessor agency for the Natural Resources and Conservation Service that we are today.

Today, NRCS has a broader emphasis:
• conserving the soil,
• increasing the quality and quantity of water,
• preserving air quality and
• expanding habitat for fish and wildlife.

Even more simply, our mission is to help people help the land.

We partner with farmers, ranchers and others to safeguard our Nation’s natural resources on private, working agricultural land.

Our strategy is something we call locally-led, cooperative conservation. Most of our work combines federal resources with landowners’ resources to improve the land and provide environmental benefits for the public.

2002 Farm Bill

With the 2002 farm bill, we’ve greatly expanded our investment in conservation. Over the past four years, we’ve applied conservation on more than 50 million acres of working farm and ranchland. Last year alone, we served nearly 100,000 farmers and ranchers and invested $3.3 billion in voluntary, incentive-based conservation.
Increasing Wetlands

Specifically, when it comes to wetlands, we are making great progress on the President’s promise on Earth Day two years ago to restore, create, improve or protect 3 million acres of wetlands by 2009. We’re more than half way there with 1.7 million acres of wetlands restored, created, improved or protected.

Under the Wetlands Reserve Program alone in 2005, NRCS signed 751 easements covering 134,000 acres of wetlands. By the end of Fiscal Year 2006, NRCS programs will have contributed 380,000 acres to the tally.

The President’s proposed budget for 2007 would increase funding for the Wetlands Reserve Program by 60 percent. With those additional funds, and support through other programs such as the Environmental Quality Incentives Program, the Wildlife Habitat Incentives Program, and Conservation Technical Assistance, we expect to help landowners restore, create, improve or protect nearly 380,000 additional acres of wetlands in 2007.

Need for Additional Resources

I’m proud of all the conservation work we’ve done with landowners. But it’s not enough. Even with increased funding provided in the 2002 farm bill, we still have a long list of worthwhile conservation projects that landowners would like to invest in, and that we would like to enable.

It’s apparent that the funds simply can’t keep pace with the demand, especially when budgets are tighter, as they are now, and likely will be in the years ahead.
What’s more, I could never advocate asking the taxpayer for funds if the marketplace can help with the lift.

It’s good that so many landowners want to preserve natural resources—and bad that we can’t help them all. But, as you are well aware, there is another option.
As you know, there are other ways to finance conservation—and we at USDA are eager to find and enable them.

Market approaches to conservation are a logical extension of our work. And we are determined to develop creative strategies that benefit the public, enhance the environment and support those who make their living from the land.


USDA Policy on Market-Based Environmental Stewardship

Toward that end, at the White House Conference on Cooperative Conservation last summer, Agriculture Secretary Johanns announced a new U.S. Department of Agriculture Policy on Market-Based Environmental Stewardship. The goal is to broaden the use of markets for environmental and ecosystem services through voluntary market mechanisms.

We believe that market-based environmental stewardship can encourage competition, spur innovation and achieve environmental benefits, while helping landowners—and others—comply with environmental regulations. The intent of this new policy is to make a deliberate, determined effort to help bring producers and consumers together and to develop innovative tools to quantify environmental impacts.

Market-Based Conservation

When I consider the term “market-based conservation,” I see a very broad role for market-related incentives. Some of the incentives involve agreements and payments—such as credit trading. Others may be options simply driven by market conditions—opportunities that farmers and ranchers have to increase productivity and improve environmental stewardship at the same time.

Reducing tillage to save on fuel costs, which also reduces soil erosion, is one example. Precision application of nitrogen is another.

As you know, market-based conservation is a rapidly evolving concept. It doesn’t replace our current approaches, but it offers the opportunity to expand what we’re doing and may, in fact, improve our current approaches.

Where Do We Go from Here?

As we move forward, we’ll be looking to many of you gathered here as we seek to expand market-based options for conservation. As you are well aware, you are the furthest along this path in the conservation community. This conference has provided some excellent opportunities to look at what works.

I approach market-based conservation as a given—it will happen. The choice we face on the policy band business side is—will it happen fast or slow?

Frankly, at this point I still have more questions than answers. And some of those questions are ones I want to pose to you.

What do you want from federal agencies—especially the nonregulatory agencies?
Are you looking for regulations to structure the market? Do you need enabling legislation or programs to launch into other tradeable environmental services?

What can we transfer from wetlands banking and mitigation to other environmental markets? How can we move toward an orderly, transparent market? How can we ensure permanence, increase reliability and foster repetition?

Or would you rather we just stepped aside and let the market develop on its own, at its own pace?

What We’re Doing Now

We welcome more guidance from you so that we can make the most effective use of our resources. At the same time, we’re already taking a number of steps that I believe are going to make a difference.

I see market-based approaches as the opportunity to make a quantum leap in getting conservation on the ground and benefiting the environment. We want to help foster that leap.

The key to vibrant markets is that they are voluntary, transparent and repeatable. There is a need out there for reliable, consistent information to willing buyers and sellers.

Someone needs to help them find each other so they can make the deals that bring environmental benefits to both parties—and others as well. You all need to decide if that should occur in the private or public sector.

At USDA, we are looking at expanding our understanding of the incentives that encourage conservation and studying how the principles of the marketplace can support voluntary conservation. We want to make our own programs and approaches as transparent as possible.

We are developing fact sheets that discuss key issues and solutions to engaging in market trades to help our customers with frequently asked questions about such issues as water quality credit trading, greenhouse gas sequestration and wetland or endangered species habitat banking. We’re also working with a private sector partner to create a handbook that specifically focuses on environmental credit training.

We will be strengthening our own Performance Results System—a database that we now use to report results of conservation practices installed under our conservation programs. And we hope to enable and encourage others in the private and NGO sectors who complete conservation projects using our standards and practices to share their results through this system so that we have a national record of accomplishments in conservation. It’s another way we can facilitate the market for environmental services.

Providing Information

Another contribution NRCS can make is our ongoing effort to develop measuring tools that reliably quantify the environmental benefits associated with various conservation practices. We’re continually working on new tools.

Last summer, NRCS launched the Web Soil Survey. Now anyone can download digitized soil maps for their properly 24/7 from the NRCS webpage at www.nrcs.usda.gov. I hope that you all have found this helpful. Over the past seven months, we’ve received more than 110 million hits, with an average of more than half a million per day.

All of our conservation practices and standards are also now on our website. They are available for you to use and also to critique. Of course, this information is also available in any of our more than 2,800 local offices.

NRCS is also participating with a number of other USDA agencies in the Conservation Effects Assessment Project. Begun in 2003, this project will help us identify the specific benefits of conservation practices, such as
• conservation buffers,
• erosion control,
• wetlands conservation and restoration,
• establishment of wildlife habitat and
• management of grazing land, tillage, irrigation water, nutrients and pests.

The initial focus is water quality, soil quality and water conservation on cropland. We expect to have results in 2008. I hope that this becomes an enabling platform for your community.

Fostering Innovation

NRCS is continually developing new conservation technology to benefit landowners and the environment. This year, we have $20 million for Conservation Innovation Grants to foster new and emerging conservation strategies and tools.
These grants go to partners who want to test innovative conservation approaches and technologies with a view toward sharing them with farmers and ranchers who could benefit.

We’re especially interested in projects that merge markets and conservation. Over the past couple of years, we have sponsored a number of pilot projects through Conservation Innovation Grants that are testing market-based incentives. Let me mention just a few examples:

• In Virginia, we are trying environmental credit trading with 100 farmers to improve water quality in the Chesapeake Bay.

• In Pennsylvania, we are demonstrating a reverse auction system for farmers to offer to install best management practices to reduce nutrients.

• In Florida, we are working with the World Wildlife Fund and ranchers to reduce phosphorous in Lake Okeechobee.

• In Rhode Island, we are seeking to develop a consumer market for nesting bird habitat on hayfields.

We expect to fund similar projects when 2006 grant awards are announced in a few weeks.

What Lies Ahead

Our agency’s new strategic plan embraces a market-based approach to conservation. So, we’re taking deliberate steps to strengthen our internal capability to enable market-based conservation. I hope it will in turn revolutionize our agency’s approach to conservation.

Conclusion

In conclusion, I believe the next major advance in conservation will come through market-based approaches. We want to be ready with the tools landowners and partners need. And we want to do everything we can to facilitate and encourage emerging markets.

We want to build on and expand your success—for the benefit of landowners, the public and the environment.